`SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB/A

(Mark One)

/X/      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

/ /      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from _____ to ____

                         Commission file number 1-13587

                         QUERYOBJECT SYSTEMS CORPORATION
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


               Delaware                                  94-3087939
--------------------------------          -------------------------------------
(State or other jurisdiction of           (IRS Employer Identification Number)
incorporation or organization


        One Expressway Plaza , Suite 208, Roslyn Heights, New York 11577
--------------------------------------------------------------------------------
        (Address of Principal Executive Offices)             (Zip Code)

       Registrant's telephone number, including area code: (516) 228-8500
                                                           --------------

          Securities registered pursuant to Section 12(b) of the Act:

                     Common Stock, par value $.003 per share

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                                              Yes /X/     No / /





Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of the  Registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.  /X/

                  State the issuer's  revenues for its most recent  fiscal year:
The  issuer's  revenues  for the  fiscal  year  ended  December  31,  2000  were
$1,715,841.

                  The  aggregate  market  value  of the  voting  stock  held  by
non-affiliates of the Registrant computed by reference to the price at which the
stock was sold on March 23, 2001 was  approximately  $4,368,000.  Solely for the
purposes of this  calculation,  shares  held by  directors  and  officers of the
Registrant  have  been  excluded.   Such  exclusion   should  not  be  deemed  a
determination  or an admission by the Registrant that such  individuals  are, in
fact, affiliates of the Registrant.

                  Indicate  the  number  of  shares  outstanding  of each of the
issuer's  classes of common stock, as of the latest  practicable  date: At March
23, 2001, there were outstanding  12,411,657  shares of the Registrant's  Common
Stock, $.003 par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

                  Certain   portions  of  the   Registrant's   definitive  proxy
statement to be filed not later than April 30, 2001 pursuant to  Regulation  14A
are  incorporated  by reference in Items 9 through 12 of Part III of this Annual
Report on Form 10-KSB.

                  Transitional Small Business Disclosure Format (check one):


                  Yes   / /   No /X/



                                       -2-





ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                  PLAN OF OPERATION


         The discussion in this report on Form 10-KSB  contains  forward-looking
statements that involve risks and  uncertainties.  The Company's  actual results
may differ materially from those discussed  herein.  Factors that could cause or
contribute to such differences  include, but are not limited to, those discussed
in the section above entitled  "Risk Factors That May Affect Future  Results" in
Item 1 of this  report as well as those  risks  discussed  in this  section  and
elsewhere in this report.

         The discussion  and analysis  below should be read in conjunction  with
the  Consolidated  Financial  Statements  of the Company  and the Notes  thereto
included elsewhere herein.

Overview

         The  Company  operates in two  business  segments;  software  sales and
support and application  services.  Software sales and support includes software
sales to third  parties on a direct  basis or through a  business  partner,  and
includes  related support in the form of maintenance  agreements and consulting.
Application  services are provided by the Company's  subsidiary  IQO and include
design,  implementation and hosting services provided to third parties,  in some
cases  utilizing  the  QueryObject  technology.   While  the  Company  commenced
operations in February  1989, the Company has a limited  operating  history as a
software  product and  application  services  company and has made only  limited
sales of both its QueryObject System and application services.

         During April 2000, the Company began significant  staffing and incurred
initial  product-related  expenses and general and administrative  expenses with
respect  to IQO.  As of  December  31,  2000,  IQO has 16 full  time  equivalent
employees.  Total expenses of IQO for the years ended December 31, 2000 and 1999
were $3,358,467 and $335,565,  respectively. IQO has developed and is developing
applications that capture,  store,  manage,  distribute and analyze data for CRM
(Customer  Relationship  Management).  IQO's  product,  CustomerView,  generated
$204,100 of revenue (12% of  consolidated  revenue) for the year ended  December
31, 2000.  IQO will also resell the Company s database,  data streaming and data
distribution technology to Internet based businesses.

         To date, the Company has incurred  substantial  losses from operations,
and at December 31, 2000, had an accumulated deficit of $51,578,413. The Company
expects to incur  substantial  operating  expenses  in the future to support its
product development  efforts (including those of IQO),  establish and expand its
domestic  and  international   sales  and  marketing   capabilities,   including
recruiting  additional  indirect  channel  partners,  and support and expand its
technical and management personnel and organization.

         Revenues  from  the  sales  of the  Company's  products  are  generally
recognized upon the execution of a software licensing  agreement and shipment of
the product,  provided that no  significant  vendor  obligations  remain and the
resulting  receivable is deemed collectible by management.  In instances where a
significant vendor obligation exists, revenue recognition is deferred until such
obligation  has been  satisfied.  Allowances  for estimated  future  returns are
provided for upon shipment.  Service revenues  consist  primarily of application
services  performed  for  customers  on a  project  or  contract  basis  and are
recognized  over the term of the  respective  agreements.  Maintenance  revenues
consist of ongoing support and products updates and are recognized  ratably over
the term of the contract, generally 12 months.

         The  Company  has revised its  computation  of net loss  applicable  to
common  shareholders  and the  related  basic and diluted net loss per share for
fiscal 2000, to $11,175,635 and $1.17,  respectively.  The revision reflects the
cumulative  effect  of a  change  in an  accounting  principle  related  to  the
beneficial  conversion feature on the Series C Preferred Stock,  issued in 1999,
calculated in accordance  with the provisions of Emerging  Issues Task Force No.
00-27.

                                      -3-




Results of Operations

         The  following   table  sets  forth  certain  items  in  the  Company's
consolidated  statements of operations for the years ended December 31, 2000 and
1999 ($ in thousands):



                                                              Year Ended December 31,

                                                           2000                    1999

Revenues
         Software licenses.........................    $      1,244           $      1,608
         Services and maintenance..................             472                    166
                                                             ------                 ------
                  Total revenues...................           1,716                  1,774
Cost of revenues
         Software licenses.........................              50                     94
         Services and maintenance..................             146                     92
                                                             ------                 ------
                  Total cost of revenues...........             196                    186
                                                             ------                  -----
Gross profit                                                  1,520                  1,588
                                                              -----                  -----
Operating expenses
         Sales and marketing.......................           7,597                  3,740
         Research and development..................           2,751                  2,283
         General and administrative................           1,757                  1,480
                                                            -------                  -----
                  Total operating expenses.........          12,105                  7,503
                                                             ------                  -----
Loss from operations                                        (10,585)                (5,915)
Interest income....................................             362                     45
Interest expense...................................             (14)                   (41)
Other expense, net.................................              (3)                   (15)
                                                      --------------            -----------
Net loss...........................................        $(10,240)               $(5,926)
                                                           =========               ========



                                      -4-




Revenues

         The  Company  has  recognized  revenue  for all  periods  presented  in
accordance with the American Institute of Certified Public Accountants Statement
of Position 97-2,  "Software Revenue  Recognition" as amended, and in compliance
with Staff Accounting  Bulletin No. 101 (see Note 1 of Notes to the Consolidated
Financial Statements).

         Total  revenues  decreased by $58,000,  or 3%, from  $1,774,000 for the
year ended December 31, 1999 to $1,716,000 for the year ended December 31, 2000.
License  revenues  decreased by $364,000,  or 23%,  from  $1,608,000  in 1999 to
$1,244,000 in 2000. During 2000,  license revenues were derived from the sale of
14 licenses, while during 1999 license revenues were derived from the sale of 18
licenses.  The  decrease in license  revenues  during 2000  compared to 1999 was
primarily due to a significant  decrease in European sales. License revenue from
European  sales  decreased by 73% or $592,100  during 2000,  which was partially
offset by an increase of 29% or $227,350 in North America license revenue.  As a
result of  decreased  European  sales,  in January  2001 the Company  decided to
change its  direct  sales  model for  European  sales to a partner  distribution
model.  The  Company  has closed its United  Kingdom  office and is  negotiating
contracts with several European distributors.

         Service and maintenance  revenue  increased by $306,000,  or 184%, from
$166,000 in 1999 to $472,000 in 2000.  This increase was primarily the result of
IQO  application  service  revenue,  that  includes  subscription  based monthly
charges to IQO  customers.  Service and  maintenance  revenues  are  expected to
increase as the Company sells additional  licenses and as IQO expands its client
base.

Cost of Revenues

         Cost  of  software  license  revenues  consists  primarily  of  royalty
payments to third  parties,  product  packaging,  documentation  and  production
costs.  Cost of software license revenues  decreased as a percentage of software
license  revenues  from  5.8% in 1999 to 4.0% in  2000,  primarily  due to lower
production and documentation costs.

         Cost  of  services  and  maintenance  revenues  consists  primarily  of
customer  support costs and direct costs  associated with  application  services
performed  by IQO.  Cost of services  and  maintenance  revenues  decreased as a
percentage of services and maintenance revenues from 55% in 1999 to 31% in 2000.
This decrease resulted primarily from higher maintenance  revenues for 2000 that
did not require additional  personnel costs related to customer support,  offset
in part by costs associated with IQO application service revenue.

Operating Expenses

         Sales and Marketing.  Sales and marketing expenses consist primarily of
personnel costs,  including sales  commissions and incentives,  of all personnel
involved  in the sales and  marketing  process,  as well as  related  recruiting
costs,  public relations,  advertising  related costs,  collateral  material and
trade shows. Sales and marketing expenses increased by $3,857,000, or 103%, from
$3,740,000  in 1999 to $7,597,000  in 2000,  primarily due to personnel  related
costs and  marketing  and sales costs of IQO  ($2,456,000  for the year ended in
2000) and a general  increase in both marketing and  consulting  expenses of the
Company.  The  Company  believes  that its sales  and  marketing  expenses  will
increase in absolute dollars as the Company continues to increase  promotion and
other marketing expenses.

         Research and  Development.  Research and development  expenses  consist
primarily of salaries and other personnel  related  expenses,  recruiting  costs
associated  with  the  hiring  of  additional  software  engineers  and  quality
assurance personnel, consultant costs and depreciation of development equipment.
Research and development expenses increased by $468,000, or 20%, from $2,283,000
in 1999 to  $2,751,000  in 2000,  primarily  due to personnel  related costs and
other  research and  development  costs of IQO  ($538,000  for the year ended in
2000),  offset in part by reduced  personnel related costs. The Company believes
that a significant  level of investment for product  research and development is
required to remain competitive and, accordingly, the Company anticipates that it
will  continue  to  devote   substantial   resources  to  product  research  and
development  (including  those of IQO) and that  these  costs will  increase  in
absolute dollars. To date, all research and development costs have been expensed
as incurred.


                                      -5-




         General and Administrative. General and administrative expenses consist
primarily of personnel  costs for finance and  accounting,  human  resources and
general management, as well as insurance and professional expenses.  General and
administrative  expenses increased by $277,000,  or 19%, from $1,480,000 in 1999
to  $1,757,000  in 2000,  primarily  due to  personnel  related  costs and other
general and  administrative  costs of IQO ($298,000 for the year ended in 2000).
This increase was partially  offset by a reduction in personnel  related  costs,
offset in part by higher professional expenses and bad debt expense. The Company
believes its general and administrative  expenses  (including those of IQO) will
increase in absolute dollars.

Interest Income and Interest Expense

         Interest income represents income earned on the Company's cash and cash
equivalents.  Interest  income  increased by $317,000,  or 704%, from $45,000 in
1999 to  $362,000  in 2000,  primarily  due to a  higher  level of cash and cash
equivalents on deposit during 2000 as a result of the closing of the IQO Private
Placement in April 2000.

         Interest expense  generally  represents  interest on capital  equipment
leases.  Interest expense decreased by $27,000,  or 66%, from $41,000 in 1999 to
$14,000 in 2000. This decrease was primarily due to a lower outstanding  balance
on capital lease obligations.

Provision for Income Taxes

         The Company  accounts for income taxes in accordance  with Statement of
Financial  Accounting  Standards  No. 109,  "Accounting  for Income  Taxes." The
Company incurred net operating losses in 2000 and 1999 and consequently  paid no
federal or state  income  taxes.  At  December  31,  2000,  the  Company had net
operating  losses and  research and  experimental  tax credit  carryforwards  of
approximately $45,332,000 and $360,000, respectively, available to offset future
federal taxable income and tax. These net operating loss carryforwards expire at
various dates through 2020.  Although the  determination of whether an ownership
change has occurred is subject to factual and legal  uncertainties,  the Company
believes  that an ownership  change  occurred  upon the  completion  of previous
financings  and such  "ownership  change" will  materially  limit the  Company's
ability to utilize its NOL carryforward. Moreover, while such loss carryforwards
are available to offset future  taxable  income of the Company,  the Company may
not generate  sufficient  taxable  income so as to utilize all or a  substantial
portion of such loss carryforwards prior to their expiration.

Liquidity and Capital Resources

         Since January 1, 1999, the Company has consummated  several  financings
to fund operations as follows:

         (a)  In  February   2001,   the  Company   received   net  proceeds  of
approximately  $837,000 from the initial  closing (the  "Initial  Closing") of a
private  placement of units  consisting of 2,050,000  shares of Common Stock and
Warrants  to  purchase  4,100,000  shares of Common  Stock  (the  "2001  Private
Placement").  The  number of units  issued by the  Company to  investors  in the
Initial  Closing  will  increase  if there is a second  and  final  (the  "Final
Closing")  of the 2001  Private  Placement  and the per unit  price in the Final
Closing  is less than the per unit price in the  Initial  Closing.  The  Company
anticipates  that it will  consummate a Final  Closing on or about April 5, 2001
and anticipates that it will receive  approximately  $1,500,000 in net proceeds.
In addition, since the per unit price in the Final Closing will be less than the
per unit price in the  Initial  Closing,  the Company  anticipates  that it will
issue  additional  units to investors who purchased units in the Initial Closing
of the 2001 Private Placement.

         (b) In April 2000,  IQO  received  $6,534,993  in net  proceeds  from a
private  placement  of  Series A  Preferred  Stock  and  Common  Stock  Purchase
Warrants. See Note 7 of Notes to the Consolidated Financial Statements.



                                      -6-




         (c) Between June and August 1999, the Company  received net proceeds of
$4,089,791  from a private  placement of securities  that have been converted or
exercised into an aggregate of 3,239,169 shares of Common Stock.

         (d) Between  October 1998 and February 1999,  the Company  received net
proceeds of $3,995,000 (of which  $1,397,004 was received after January 1, 1999)
from two private  placements of securities that have been converted or exercised
into an aggregate of 4,834,103 shares of Common Stock.

         During the year ended  December  31,  1999,  the  exercise  of Warrants
granted  in the  private  placements  noted  in (c) and (d)  above  resulted  in
proceeds to the Company of  $5,213,908.  In January  2000,  the  exercise of the
remaining outstanding Warrants from such private placements resulted in proceeds
to the Company of $1,456,250.

         As of December 31, 2000,  the Company had  $3,456,926  in cash and cash
equivalents  and  working  capital  of  $2,435,091.  The  Company  has  incurred
operating  losses  since  inception,  has  incurred  negative  cash  flows  from
operating  activities  and  had an  accumulated  deficit  of  $51,578,413  as of
December 31, 2000. The Company has had a limited operating history as a software
product and application  services company and has not made significant  sales of
its products.  Therefore,  revenues and operating profitability are difficult to
predict.  It is  anticipated  that even with the  anticipated  proceeds from the
Final Closing of the 2001 Private Placement the cash and cash equivalent balance
of the Company at December  31, 2000 may not be  sufficient  to satisfy its cash
flow  requirements  for the next 12  months.  The  Company  may seek  additional
financing to ensure that it can continue its operations.  The sale of additional
equity   securities  will  result  in  additional   dilution  to  the  Company's
stockholders.  See "Risk Factors That May Affect  Future  Results -- We may need
further financing to continue operations."

         Net cash used in operating  activities was $8,162,000 and $6,423,000 in
2000 and 1999, respectively. For 2000, net cash used in operating activities was
primarily  attributable  to a net loss of  $10,240,000  reduced by a decrease in
accounts  receivable of $786,000,  depreciation and amortization of $516,000 and
options issued for consulting  services of $583,000.  For 1999, net cash used in
operating activities was primarily  attributable to a net loss of $5,926,000 and
an  increase  in  accounts   receivable  of  $955,000,   less  depreciation  and
amortization  of  $439,000.  Net  cash  provided  by  financing  activities  was
$8,183,000 and  $10,319,000 in 2000 and 1999,  respectively.  For 2000, net cash
provided by financing  activities  was  primarily  the result of the IQO Private
Placement and the exercise of common stock purchase warrants. For 1999, net cash
provided  by  financing  activities  was  primarily  the  result of the  Private
Placements  noted in (c) and (d) above and the exercise of common stock purchase
warrants. Net cash used in investing activities was primarily the acquisition of
property and equipment for both 2000 and 1999.

         The Company does not currently  have a line of credit with a commercial
bank. As of December 31, 2000, the Company's principal  commitments consisted of
obligations  under  operating and capital leases and employment  agreements.  At
that date, the Company had approximately $10,000 in outstanding borrowings under
capital leases which are payable in 2001. Pursuant to employment agreements with
executive  officers  of the  Company as of  December  31,  2000,  the  Company's
obligation  is to pay $612,500  and $0 in salaries for the years ended  December
31, 2001 and 2002, respectively.


ITEM 7.           FINANCIAL STATEMENTS

                  See Index to Financial Statements.


                                      -7-





         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        QueryObject Systems Corporation


Dated: July 19, 2001                    By: /s/ Daniel Pess
                                            ---------------------------------
                                            Executive Vice President and
                                            Chief Financial Officer





QueryObject Systems Corporation
Consolidated Financial Statements
December 31, 2000 and 1999






                                      F-1





                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                              Page

Report of Independent Accountants...............................................................F-2
Consolidated Balance Sheet as of December 31, 2000..............................................F-3
Consolidated Statements of Operations for the years ended December 31, 2000 and 1999............F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended
  December 31, 2000 and 1999....................................................................F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2000 and 1999............F-6
Notes to the Consolidated Financial Statements..................................................F-7



                                      F-1



                        Report of Independent Accountants

To the Board of Directors
and Stockholders of
QueryObject Systems Corporation

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated  statements  of  operations,  of  changes in  stockholders'  equity
(deficit)  and of cash flows  present  fairly,  in all  material  respects,  the
financial  position  of  QueryObject  Systems  Corporation  (the  "Company")  at
December 31, 2000, and the results of their  operations and their cash flows for
the two years then ended in  conformity  with  accounting  principles  generally
accepted in the United States of America.  These  financial  statements  are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United  States of America which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.

     As discussed in Note 1, the Company has amended the consolidated  financial
statements  to  revise  the  computation  of the net loss  applicable  to common
stockholders and related per share data for the year ended December 31, 2000.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from operations and has incurred  negative cash flows from operating  activities
that raise  substantial  doubt about its ability to continue as a going concern.
Management's  plans in regard to these matters are also described in Note 2. The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.



PricewaterhouseCoopers LLP
Melville, New York
March 21, 2001 except for the fifth paragraph
of Note 1 which is as of July 19, 2001


                                       F-2





QueryObject Systems Corporation

Consolidated Balance Sheet
--------------------------------------------------------------------------------


                                                                                      December 31,
                                                                                        2000
ASSETS
Current assets
     Cash and cash equivalents .................................................   $  3,456,926
     Accounts receivable, net of allowance for doubtful
         accounts of $33,562 ...................................................        445,888
     Prepaid expenses and other current assets .................................        114,219
                                                                                   ------------

             Total current assets ..............................................      4,017,033

Property and equipment, net ....................................................      1,374,334
Deposits and other assets ......................................................        109,478
                                                                                   ------------

             Total assets ......................................................   $  5,500,845
                                                                                   ------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
     Accounts payable ..........................................................   $    563,352
     Accrued expenses ..........................................................        601,830
     Deferred revenue ..........................................................        120,049
     Deferred rent .............................................................         36,894
     Loans payable to stockholders .............................................        250,000
     Capital lease obligations due within one year .............................          9,817
                                                                                   ------------

             Total current liabilities .........................................      1,581,942

Deferred rent ..................................................................        155,179
                                                                                   ------------

             Total liabilities .................................................      1,737,121
                                                                                   ------------

Minority interest (Note 7) .....................................................      6,535,137
                                                                                   ------------

Stockholders' deficit
     Preferred stock, $.001 par value: 4,000,000 shares authorized;
         none issued and outstanding ...........................................           --
     Common stock, $.003 par value: 60,000,000 shares
         authorized; 10,361,657 shares issued and outstanding ..................         31,085
     Additional paid-in-capital ................................................     48,775,915
     Accumulated deficit .......................................................    (51,578,413)
                                                                                   ------------

             Total stockholders' deficit .......................................     (2,771,413)
                                                                                   ------------

Commitments and contingencies (Notes 2 and 14)

             Total liabilities and stockholders' deficit .......................   $  5,500,845
                                                                                   ------------

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                       F-3





QueryObject Systems Corporation

Consolidated Statement of Operations
--------------------------------------------------------------------------------


                                                                      Year Ended December 31,
                                                                      2000            1999

Revenues
     Software licenses .......................................   $  1,243,650    $  1,608,400
     Services and maintenance ................................        472,191         165,709
                                                                 ------------    ------------

             Total revenues ..................................      1,715,841       1,774,109

Cost of revenues
     Software licenses .......................................         50,252          93,637
     Services and maintenance ................................        146,027          92,488
                                                                 ------------    ------------

             Total cost of revenues ..........................        196,279         186,125
                                                                 ------------    ------------

Gross profit .................................................      1,519,562       1,587,984
                                                                 ------------    ------------

Operating expenses
     Sales and marketing .....................................      7,596,996       3,740,385
     Research and development ................................      2,751,038       2,282,910
     General and administrative ..............................      1,757,246       1,479,823
                                                                 ------------    ------------

             Total operating expenses ........................     12,105,280       7,503,118
                                                                 ------------    ------------

Loss from operations .........................................    (10,585,718)     (5,915,134)

Interest income ..............................................        361,847          45,315
Interest expense .............................................        (13,523)        (41,121)
Other expense, net ...........................................         (2,972)        (14,651)
                                                                 ------------    ------------

Net loss before cumulative effect of a change in an
accounting principle as to 2000...............................   $(10,240,366)   $ (5,925,591)
                                                                 ------------    ------------

Cumulative effect of a change in accounting principle-revised
as to  2000...................................................       (935,269)             --

Net loss applicable to common stockholders-revised
as to 2000....................................................    (11,175,635)     (5,925,591)

Basic and diluted net loss per common share before cumulative
effect of a change in accounting principle...................   $      (1.08)   $      (2.57)
                                                                 ------------    ------------

Cumulative effect of a change in accounting
principle-revised as to 2000.................................          (0.09)              --

Basis and diluted net loss per common share-revised
as to 2000....................................................          (1.17)          (2.57)

Weighted average shares used in per share computation (Note 1)      9,525,503       2,302,641
                                                                 ------------    ------------

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      F-4




QueryObject Systems Corporation

Consolidated Statements of Changes in Stockholders' Equity (Deficit)
--------------------------------------------------------------------------------


                                                      Series A Convertible          Series B Convertible      Series C Convertible
                                                        Preferred Stock                Preferred Stock          Preferred Stock
                                                    --------------------------------------------------------------------------------
                                                    Shares             Amount        Shares        Amount        Shares    Amount
                                                    --------------------------------------------------------------------------------

Balance at January 1, 1999                             1,731,125       $ 1,731       100,000          $ 100            -    $    -

Issuance of Series C preferred stock, net                                                                          4,500         5
Conversion of preferred stock to common stock           (121,750)         (122)       (9,500)            (9)        (645)       (1)
Common stock warrants exercised
Issuance of common stock options for
     consulting services
Receipt of receivable from stockholders
Common stock options exercised
Net loss
                                                    -------------  ------------  ------------ -------------- ------------  ---------

Balance at December 31, 1999                           1,609,375         1,609        90,500             91        3,855         4

Conversion of preferred stock to common stock         (1,609,375)       (1,609)      (90,500)           (91)      (3,855)       (4)
Common stock warrants exercised
Issuance of common stock options for
     consulting services
Common stock options exercised
Placement agent purchase options exercised
Net loss
                                                    -------------  ------------  ------------ -------------- ------------  ---------

Balance at December 31, 2000                                   -           $ -             -            $ -            -    $    -
                                                    -------------  ------------  ------------ -------------- ------------  ---------

                                                        Common Stock        Additional                         Stock
                                                 -----------------------     Paid-in        Accumulated    Subscriptions
                                                  Shares       Amount        Capital           Deficit       Receivable
                                                 --------------------------------------------------------------------------

Balance at January 1, 1999                       1,707,662     $ 5,123      $36,910,576     $(35,412,456)    $(1,519,200)

Issuance of Series C preferred stock, net                                     4,089,786
Conversion of preferred stock to common stock      475,095       1,425           (1,293)
Common stock warrants exercised                  2,767,573       8,303        5,205,605
Issuance of common stock options for
     consulting services                                                        471,861
Receipt of receivable from stockholders                                        (122,196)                       1,519,200
Common stock options exercised                      33,333         100           93,900
Net loss                                                                                      (5,925,591)
                                                --------------------------- --------------------------------- -------------

Balance at December 31, 1999                     4,983,663      14,951      $46,648,239     $(41,338,047)    $         -

Conversion of preferred stock to common stock    4,238,908      12,717          (11,013)
Common stock warrants exercised                    591,698       1,775        1,454,475
Issuance of common stock options for
     consulting services                                                        583,238
Common stock options exercised                      36,385         109          102,509
Placement agent purchase options exercised         511,003       1,533           (1,533)
Net loss                                                                                     (10,240,366)
                                                --------------------------- --------------------------------- -------------

Balance at December 31, 2000                    10,361,657    $ 31,085      $48,775,915     $(51,578,413)    $         -
                                                --------------------------- --------------------------------- -------------


                                                     Total
                                                 Stockholders'
                                                 Equity (Deficit)
                                                ----------------

Balance at January 1, 1999                        $  (14,126)

Issuance of Series C preferred stock, net          4,089,791
Conversion of preferred stock to common stock              -
Common stock warrants exercised                    5,213,908
Issuance of common stock options for
     consulting services                             471,861
Receipt of receivable from stockholders            1,397,004
Common stock options exercised                        94,000
Net loss                                          (5,925,591)
                                                -------------

Balance at December 31, 1999                      $5,326,847

Conversion of preferred stock to common stock              -
Common stock warrants exercised                    1,456,250
Issuance of common stock options for
     consulting services                             583,238
Common stock options exercised                       102,618
Placement agent purchase options exercised                 -
Net loss                                         (10,240,366)
                                                -------------

Balance at December 31, 2000                     $(2,771,413)
                                                -------------

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      F-5




QueryObject Systems Corporation

Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------


                                                                  Year Ended December 31,
                                                                  2000              1999

Cash flows from operating activities
     Net loss ............................................   $(10,240,366)   $ (5,925,591)
     Adjustments to reconcile net loss to net cash used in
         operating activities
             Depreciation and amortization ...............        515,927         438,806
             Loss on disposition of equipment ............          9,033           1,312
             Options issued for consulting services ......        583,238         471,861
             Changes in assets and liabilities
                 Accounts receivable, net ................        785,660        (955,021)
                 Prepaid expenses and other current assets         34,014        (110,483)
                 Deposits and other assets ...............         47,568         (76,015)
                 Accounts payable and accrued expenses ...        253,283        (374,879)
                 Deferred rent ...........................       (100,219)         22,465
                 Deferred revenue ........................        (49,707)         84,964
                                                             ------------    ------------

                 Net cash used in operating activities ...     (8,161,569)     (6,422,581)
                                                             ------------    ------------

Cash flows from investing activities
     Acquisitions of property and equipment ..............     (1,052,994)       (328,130)
     Repayment of officer note receivable ................           --            65,000
     Proceeds from disposition of equipment, net .........           --             1,948
                                                             ------------    ------------

                 Net cash used in investing activities ...     (1,052,994)       (261,182)
                                                             ------------    ------------

Cash flows from financing activities
     Proceeds from issuance of preferred stock, net ......           --         4,089,791
     Proceeds from issuance of IQO preferred stock, net ..      6,534,993            --
     Proceeds from exercise of common stock warrants .....      1,456,250       5,213,908
     Proceeds from exercise of common stock options ......        102,762          94,000
     Collection of stock subscriptions receivable, net ...           --         1,397,004
     Repayment of loans payable to stockholders ..........           --          (700,000)
     Proceeds from loans payable to stockholders .........        250,000         400,000
     Payments of capital lease obligations ...............       (161,370)       (176,104)
                                                             ------------    ------------

                 Net cash provided by financing activities      8,182,635      10,318,599
                                                             ------------    ------------

Net (decrease) increase in cash and cash equivalents .....     (1,031,928)      3,634,836

Cash and cash equivalents at beginning of year ...........      4,488,854         854,018
                                                             ------------    ------------

Cash and cash equivalents at end of year .................   $  3,456,926    $  4,488,854
                                                             ------------    ------------

                                       F-6




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

1.       Organization and Summary of Significant Accounting Policies

         Organization
         QueryObject   Systems   Corporation   (the  "Company")  was  originally
         incorporated in California in February 1989. In November 1997, pursuant
         to a plan of  corporate  reorganization,  the  Company  merged with its
         wholly  owned  Delaware  subsidiary.  The Company  develops and markets
         proprietary  business  intelligence  software and application  services
         solutions that enable business managers to leverage existing  corporate
         data in making strategic decisions.

         Summary of significant accounting policies

         Basis of presentation
         The  consolidated   financial   statements   include  the  accounts  of
         QueryObject  Systems  Corporation and its majority owned  subsidiaries,
         internetQueryObject     Corporation    ("IQO"),     QueryObjectexchange
         Corporation and QueryObject Systems  Corporation,  Ltd. All significant
         intercompany transactions have been eliminated in consolidation.

         Basic and diluted net loss per share-Revised
         Basic net loss per share is computed  by  dividing  the net loss by the
         sum  of  the  weighted   average  number  of  shares  of  common  stock
         outstanding.  The  weighted  average  number of shares of common  stock
         outstanding  includes  the  number of  common  shares  issued  upon the
         conversion  of  Convertible   Preferred   Stock,  as  of  the  date  of
         conversion, and the number of common shares issued upon the exercise of
         options and warrants, as of the date of exercise.

         Diluted  earnings  per share is based on the  potential  dilution  that
         would occur on exercise or conversion of securities  into common stock.
         At December  31,  2000 and 1999,  outstanding  options and  warrants to
         purchase 3,225,239 and 3,406,390 shares of common stock,  respectively,
         that could  potentially  dilute basic  earnings per share in the future
         were not  included  in the  computation  of diluted  net loss per share
         because to do so would have had an antidilutive  effect for the periods
         presented.  In addition,  the Convertible  Preferred Stock  outstanding
         during  2000  and 1999 has been  excluded  prior to its  conversion  to
         common stock, due to the antidilutive  effect.  As a result,  the basic
         and diluted per share amounts are identical for all periods presented.

         The  Company  has revised its  computation  of net loss  applicable  to
         common  shareholders  and the  related  basic and  diluted net loss per
         share for fiscal 2000,  to  $11,175,635  and $1.17,  respectively.  The
         revision  reflects the  cumulative  effect of a change in an accounting
         principle related to the beneficial  conversion feature on the Series C
         Preferred  Stock,  issued in 1999,  calculated in  accordance  with the
         provisions of Emerging Issues Task Force No. 00-27.

         Cash and cash equivalents
         The Company  considers  all highly  liquid  investments  with  original
         maturities of three months or less to be cash equivalents.

         Revenue recognition
         The  Company   recognizes  revenue  in  accordance  with  the  American
         Institute  of  Certified  Public  Accountants  ("AICPA")  Statement  of
         Position 97-2 on Software  Revenue  Recognition  and in compliance with
         Staff Accounting  Bulletin No. 101.  Revenue from product  licensing is
         generally  recognized  after  execution  of a licensing  agreement  and
         shipment  of  the  product,   provided  that  no   significant   vendor
         obligations  remain and the resulting  receivable is deemed collectable
         by  management.  In instances  where a  significant  vendor  obligation
         exists,  revenue recognition is deferred until such obligation has been
         satisfied.  Service revenues consist primarily of application  services
         performed  for  customers  on a  project  or  contract  basis  and  are
         recognized  on a percentage  of  completion  basis over the term of the
         respective agreements.  Maintenance revenues consist of

                                      F-7



QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

         ongoing support and product updates and are recognized ratably over the
         term of the contract, generally twelve months.

         Depreciation and amortization
         Depreciation  and  amortization  are computed  using the straight  line
         method over the estimated  useful lives of the assets,  generally three
         to five years.  Assets  acquired  under  capital  leases and  leasehold
         improvements  are  amortized  using the  straight-line  method over the
         shorter of the estimated useful lives of the assets or the terms of the
         related leases.

         Software development costs
         Statement of Financial  Accounting Standards No. 86 "Accounting for the
         Costs of Computer  Software to be Sold,  Leased or Otherwise  Marketed"
         ("SFAS 86") requires the capitalization of certain software development
         costs once technological feasibility is established,  which the Company
         defines  as the  completion  of a working  model.  To date,  the period
         between   achieving   technological   feasibility   and   the   general
         availability  of such software has been short and software  development
         costs   qualifying   for   capitalization   have  been   insignificant.
         Accordingly, the Company has expensed all software development costs as
         incurred.

         Web Site Development Costs
         Pursuant to Emerging  Issues  Task Force No. 00-2  ("EITF-00-2"),  "Web
         Site  Development  Costs," the Company  applies SOP 98-1 to account for
         web site development  costs. In accordance with EITF-00-2,  the Company
         expenses all costs incurred  during the  preliminary  project stage and
         capitalizes  all internal and  external  direct costs of materials  and
         services consumed in developing the software,  once the development has
         reached the  application  development  stage.  Application  development
         stage  costs   generally   include   software   configuration,   coding
         installation to hardware and testing.  These costs are amortized over a
         one year period, the estimated useful life of the software application,
         commencing  upon  substantial  completion  of the web  site.  All costs
         incurred for upgrades,  maintenance and enhancements including the cost
         of web site  content that does not result in  additional  functionality
         are  expensed as incurred.  As of December  31,  2000,  the Company has
         capitalized  $255,000 of web site development costs. For the year ended
         December 31, 2000, $42,502 has been recognized as amortization expense.

         Advertising
         Advertising costs are included in sales and marketing  expenses and are
         expensed  as  incurred.   To  date  advertising  costs  have  not  been
         significant.

         Income taxes
         The Company  provides for income taxes in accordance  with Statement of
         Financial  Accounting  Standards No. 109, "Accounting for Income Taxes"
         ("SFAS 109").  Income taxes are computed  using the asset and liability
         method.  Under the asset and  liability  method  specified by SFAS 109,
         deferred income tax assets and liabilities are determined  based on the
         differences between the financial reporting and tax bases of assets and
         liabilities and are measured using the currently  enacted tax rates and
         laws. In addition,  valuation allowances are established when necessary
         to reduce deferred tax assets to the amounts expected to be realized.

                                      F-8



QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

         Use of estimates
         These   consolidated   financial   statements  have  been  prepared  in
         conformity with generally accepted accounting  principles which require
         management to make reasonable estimates and assumptions that affect the
         reported   amounts  of  assets  and   liabilities   and  disclosure  of
         contingencies  at the date of the  consolidated  financial  statements.
         Actual results could differ from those estimates.

         Fair value of financial instruments
         The carrying value of cash and cash equivalents,  accounts  receivable,
         accounts payable,  accrued expenses and notes payable approximates fair
         value due to the relatively short term nature of these instruments.

         Concentrations of credit risk
         Financial   instruments  which  potentially   subject  the  Company  to
         significant  concentrations of credit risk consist principally of cash,
         cash equivalents and accounts  receivable.  The Company places its cash
         with high quality financial institutions.  The Company performs ongoing
         credit   evaluations  of  its  customers  and  generally   requires  no
         collateral.  The Company maintains reserves for potential credit losses
         and historically such losses have not been significant.

         Accounting for stock-based compensation
         In October 1995,  the Financial  Accounting  Standards  Board  ("FASB")
         issued Statement of Financial Accounting Standards No. 123, "Accounting
         for Stock-Based Compensation" ("SFAS 123"). SFAS 123 established a fair
         value based method of accounting for  stock-based  compensation  plans.
         The Company  has chosen to adopt the  disclosure  requirements  of SFAS
         123, and continue to record stock-based compensation in accordance with
         Accounting  Principles  Board  Opinion  No. 25,  "Accounting  for Stock
         Issued to Employees" ("APB 25") and its related interpretations.  Under
         APB 25,  the  Company  has not  recognized  compensation  expense  with
         respect to such awards because the exercise price of options granted to
         employees has approximated the fair market value of the common stock at
         the respective grant dates.

         The Company accounts for equity  instruments issued to non-employees in
         accordance  with SFAS 123 and  Emerging  Issues  Task  Force No.  96-18
         ("EITF 96-18"),  "Accounting for Equity  Instruments That Are Issued to
         Other Than  Employees for Acquiring,  or in  Conjunction  with Selling,
         Goods and Services."

2.       Liquidity and Business Risks

         The Company has incurred operating losses since inception, has incurred
         negative cash flows from  operating  activities  and had an accumulated
         deficit of  $51,578,413  as of December 31, 2000. The Company has had a
         limited  operating  history  as  a  software  product  and  application
         services company and has not made significant  sales of its products or
         services,   therefore,   revenues  are  difficult  to  predict.  It  is
         anticipated  that the  Company's  cash and cash  equivalent  balance at
         December  31,  2000 may not be  sufficient  to  satisfy  its cash  flow
         requirements  for more than twelve months.  In this event,  the Company
         will seek to sell additional equity securities,  however,  there can be
         no assurance that the Company would be successful in raising sufficient
         additional  funds  (See  Note  15).  The  sale  of  additional   equity
         securities  would  result  in  additional  dilution  to  the  Company's
         stockholders.

                                      F-9



QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


3.       Supplemental Cash Flow Information

                                                         Year Ended December 31,
                                                               2000      1999

Interest paid during the period .........................   $  8,797   $ 53,207
Schedule of non cash investing and financing activities:
     Common stock options issued for consulting services     583,238    471,861
     Cashless exercise of placement agent puchase options      1,533       --

4.       Property and Equipment

         Property and equipment included the following:

                                                                 December 31,
                                                                    2000

Computer equipment and software                                  $2,823,985
Furniture and fixtures                                              197,676
Office equipment                                                    153,085
Leasehold improvements                                               23,463
Other                                                               255,000
                                                                 ----------
                                                                  3,453,209

Less: accumulated depreciation and amortization                   2,078,875
                                                                -----------

                                                                $ 1,374,334
                                                                -----------

5.       Accrued Expenses

         Accrued expenses included the following:


                                                               December 31,
                                                                 2000

Compensation and related benefits                               $272,334
Consulting and professional fees                                  74,796
Marketing expenses                                                70,651
Other                                                            184,049
                                                                --------

                                                                $601,830
                                                                --------

                                      F-10




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

6.       Borrowing Arrangements

         Interim financing
         In December  2000,  the Company  issued  convertible  promissory  notes
         payable in the amount of $250,000 to  stockholders  of the Company (the
         "2000  Notes").  The 2000 Notes bear  interest at 12% per annum and are
         due at the earlier of February 28, 2001 or the successful  consummation
         of the 2001 Private Placement. The conversion feature of the 2000 Notes
         was not considered a benefit to the holders on the date of issuance, as
         the accounting  conversion  price was higher than the fair market value
         of the underlying  common stock.  Upon the initial  closing of the 2001
         Private Placement on February 7, 2001, the 2000 Notes were converted to
         Units in the 2001 Private Placement.

         During  May  and  June  1999,  the  Company   borrowed   $400,000  from
         stockholders  of the Company  evidenced by promissory  notes (the "1999
         Notes").  The 1999 Notes bore interest at 12% per annum and were due at
         the  earlier of June 30,  1999 or the  successful  consummation  of the
         Series C Private  Placement.  Upon the initial  closing of the Series C
         Private Placement on June 28, 1999, the 1999 Notes were repaid.

         In September and October 1998, the Company borrowed a total of $490,000
         from  stockholders  of the Company  evidenced by promissory  notes (the
         "1998  Notes").  The 1998 Notes bore interest at 12% per annum and were
         due at the earlier of March 2000 or the successful  consummation of the
         Series A Private  Placement.  Upon the initial  closing of the Series A
         Private  Placement  in  October  1998,  $20,000  of the 1998  Notes was
         converted into Series A Units and $170,000 of the 1998 Notes was repaid
         through December 1998. The balance of $300,000, outstanding at December
         31, 1998 was repaid in full in January 1999.

         Loan receivable from officer
         In January 1998,  the Company loaned $65,000 to an officer and director
         of the Company.  The  promissory  note had a term of 24 months and bore
         interest at 8% per annum. In April 1999, the loan receivable was offset
         in full  against  amounts owed to the officer in  conjunction  with his
         separation from the Company.

7.       Stockholders' Equity

         IQO preferred stock
         In April  2000,  IQO sold 70  Units  (the  "IQO  Units")  in a  private
         placement.  The  purchase  price per IQO Unit was  $100,000 and totaled
         gross proceeds of $7,000,000. Each IQO Unit consisted of 125,000 shares
         of IQO Series A Preferred Stock and a Common Stock Purchase  Warrant to
         purchase  125,000  shares  of IQO's  Common  Stock  (the  "IQO  Private
         Placement"). IQO received net proceeds of $6,534,993 in the IQO Private
         Placement.  Each share of IQO Series A Preferred  Stock is convertible,
         at the  option  of the  holder,  into  one  share of IQO  Common  Stock
         (8,750,000 shares in total).  The Series A Preferred Stock ranks senior
         to all  other  classes  of IQO  capital  stock  and  has a  liquidation
         preference  equal to its  purchase  price of $.80  per  share.  The IQO
         Series A Preferred  Stock is not entitled to receive  dividends  unless
         dividends  are declared on a junior  security  with the approval of the
         Series  A  stockholders.   The  Common  Stock  Purchase   Warrants  are
         exercisable  until  April 17,  2001 at an  exercise  price of $1.00 per
         share.

                                      F-11




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


         IQO granted the placement agent in the IQO Private  Placement an option
         to purchase 492,500 shares of its Common Stock and paid commissions and
         a non-accountable expense allowance of $394,000. The securities offered
         and sold in the IQO Private  Placement  were not  registered  under the
         Securities  Act of 1933, as amended,  and may not be offered or sold in
         the United  States by the holders  thereof  absent  registration  or an
         applicable exemption from registration requirements.

         As of December  31,  2000,  the Company  owns all the  outstanding  IQO
         Common  Stock.  Assuming  the  conversion  of all of the IQO  Series  A
         Preferred  Stock into IQO Common Stock,  the Company would own 53.3% of
         the outstanding IQO Common Stock. The Company has reported the proceeds
         from the IQO Private  Placement,  less  professional  expenses and fees
         associated with the offering,  as Minority Interest in the accompanying
         Consolidated Balance Sheet.

         Convertible preferred stock
         Between June and August 1999,  the Company sold 45 Units (the "Series C
         Units")  of  Series  C  Preferred  Stock  totaling  gross  proceeds  of
         $4,500,000 in a private  placement (the "Series C Private  Placement").
         The purchase  price per Series C Unit was $100,000.  Each Series C Unit
         consisted of 100 shares of Series C Preferred  Stock and a Common Stock
         Purchase Warrant (the "Series C Warrants")  exercisable  until December
         28, 2001 to purchase 33,333 shares of Common Stock at an exercise price
         of $2.5875 per share.  As described  below,  the Series C Warrants were
         called for redemption and all holders of the Series C Warrants  elected
         to exercise their Series C Warrants in lieu of redemption.  The Company
         received net proceeds of $4,089,791  in the Series C Private  Placement
         and issued 4,500 shares of Series C Preferred  Stock,  convertible into
         an aggregate of 1,739,133  shares of Common Stock and Series C Warrants
         to purchase an  aggregate of 1,500,000  shares of Common  Stock.  As of
         December 31, 1999,  there were 3,855 shares of Series C Preferred Stock
         issued and  outstanding,  all of which  converted into shares of Common
         Stock during 2000.

         The Company  granted the placement agent and the selected dealer in the
         Series C Private  Placement options to purchase an aggregate of 146,667
         shares of Common Stock (the "Series C Option") and paid commissions and
         non-accountable  expense allowances equal to 7.1% of the gross proceeds
         received by the  Company.  During  2000,  options to  purchase  114,976
         shares of Common Stock were  exercised  pursuant to the Series C Option
         resulting in 77,893 shares of Common Stock being issued.

         Between  October and February 1999,  the Company  received net proceeds
         totaling $3,995,000 from two private  placements.  The Series A Private
         Placement  consisted of  1,750,000  Units (the "Series A Units") with a
         gross  sales  price  of  $3,500,000.  The  Series B  Private  Placement
         consisted  of 10 Units (the  "Series B Units") with a gross sales price
         of  $1,000,000.  Each Series A Unit  consisted of one share of Series A
         Preferred  Stock and a  warrant  to  purchase  .83 of a share of Common
         Stock at a per share exercise price equal to $1.50.  Each Series B Unit
         consisted  of ten  thousand  shares  of  Series B  Preferred  Stock and
         warrants to purchase an aggregate of 41,667 shares of Common Stock at a
         per share exercise price equal to $1.50. As described below, the Series
         A and Series B warrants were called for  redemption  and all holders of
         the Series A and Series B Warrants  elected to exercise  their warrants
         in lieu of redemption. The Series A Units were sold at a purchase price
         of $2.00 per Unit and each  Series A share was  convertible  into 1.333
         shares of Common  Stock.  The  Series B Units  were sold at a  purchase
         price of $100,000 per Unit and each Series B share was convertible into
         6.666 shares of Common  Stock.  As of December 31, 1999,  1,609,375 and
         90,500 shares of Series A Preferred Stock and Series B Preferred Stock,
         respectively,  were issued and outstanding, all of which

                                      F-12




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


         converted  into shares of Common Stock during 2000.  All  subscriptions
         receivable  as of  December  31,  1998 were  received by the Company in
         January and February 1999.

         In connection  with the Series A and Series B Private  Placements,  the
         placement  agent was granted an option (the "Series A and B Option") to
         purchase  additional  Series A and  Series B Units  equal to 10% of the
         total Series A and Series B Units sold and  received a  commission  and
         non-accountable expense allowance equal to 5.6% and 9.3%, respectively,
         of the gross proceeds received by the Company.  During 2000, the Series
         A and B Option was  exercised  and 411,570  shares of Common  Stock was
         issued.

         Common stock
         In  December  1999,  all  Series A, B and C  Warrants  were  called for
         redemption  in  accordance  with their  respective  guidelines,  with a
         redemption  date in January  2000.  Certain  Series A, B and C Warrants
         were exercised during 1999,  prior to the call for redemption.  For the
         year  ended  December  31,  1999,  the  exercise  of  Series A, B and C
         Warrants  resulted in the issuance of 2,767,573  shares of common stock
         with  proceeds  to the  Company of  $5,213,908.  In January  2000,  the
         exercise of the  remaining  Series A, B and C Warrants  resulted in the
         issuance of 591,697 shares of Common Stock with proceeds to the Company
         of  $1,456,250.  All Series A, B and C Warrants were exercised and as a
         result, were not redeemed.

         For the year ended  December 31, 1999, the holders of Series A, B and C
         Preferred  Stock  elected  to  convert  a total of  131,895  shares  of
         Preferred Stock into 475,061 shares of Common Stock. For the year ended
         December  31,  2000,  the holders of Series A, B and C Preferred  Stock
         elected to convert all their  remaining  Preferred Stock into 4,238,908
         shares of Common Stock.

8.                Stock Benefit Plans

         The Company has two stock benefit plans;  the 1991 Incentive Stock Plan
         (the "1991 Plan") and the 2000 Stock Option Plan (the "2000 Plan"). The
         1991 Plan and the 2000 Plan  (collectively,  the  "Plans")  allows  the
         Board to grant either incentive or  non-qualified  stock options to the
         Company's employees or consultants. During 2000, the Company's Board of
         Directors  approved the  establishment  of the 2000 Plan and authorized
         725,000 shares reserved for issuance.  During 1999, the Company's Board
         of Directors  approved an increase in the number of shares reserved for
         issuance  pursuant  to the 1991 Plan to  2,602,000.  No options  may be
         granted  under the 1991 Plan  after  June  2001.  The  options  granted
         pursuant to the 1991 Plan generally expire between five and seven years
         from the date of grant. All options issued after November 1998 pursuant
         to the Plans have a term of seven  years  from the date of grant,  with
         options  issued to  employees  vesting  over a  three-year  period  and
         options  issued to  non-employees  vesting over two years.  Individuals
         owning more than 10% of the total combined  voting power of all classes
         of stock of the Company are not  eligible to  participate  in the Plans
         unless the option  price is at least 110% of the fair  market  value of
         the underlying common stock at the date of grant.

         In  addition,  during 1999 the Board of  Directors  of IQO approved the
         establishment  of the 1999  Stock  Option  Plan  (the "IQO  Plan")  and
         authorized 5,000,000 shares reserved for issuance.  Pursuant to the IQO
         Plan,  its Board can grant  either  incentive  or  non-qualified  stock
         options to IQO's employees or consultants. The options granted pursuant
         to the IQO Plan have a term of seven  years  from the date of grant and
         generally  vest over three years.  Individuals  owning more than 10% of
         the total

                                      F-13




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


         combined  voting  power of all classes of stock of IQO are not eligible
         to participate in the IQO Plan unless the option price is at least 110%
         of the fair market value of the underlying  common stock at the date of
         grant.

         A summary of the activity under the Plans is as follows:


                                                                      Weighted
                                               Options     Shares      Average
                                              Available    Under      Exercise
                                              for Grant    Option      Price
                                              ---------   ---------   ---------

Options outstanding at January 1, 1999        410,503     1,462,012    $   2.89

Additional shares authorized                  666,666          --       --
Granted                                      (513,000)      513,000        4.02
Exercised                                        --         (33,333)       2.82
Canceled                                      100,000      (100,000)       2.82
                                           ----------    ----------    --------

Options outstanding at December 31, 1999      664,169     1,841,679        3.21

Additional shares authorized                  725,000          --       --
Granted                                      (958,517)      958,517        5.11
Exercised                                        --         (36,385)       2.82
Canceled                                      168,514      (168,514)       4.05
                                           ----------    ----------    --------

Options outstanding at December 31, 2000      599,166     2,595,297        3.87
                                           ----------    ----------    --------

Options exercisable at December 31, 2000                  1,423,766
                                                         ----------

Options exercisable at December 31, 1999                    836,310
                                                         ----------

The  following   summarizes   information  about  the  Company's  stock  options
outstanding pursuant to the Plans at December 31, 2000:

                                          Outstanding                Exercisable
                                          -----------                -----------
                                                    Weighted                   Weighted
                                         Weighted    Average                   Average
                                         Average    Exercise                   Exercise
Exercise Price Range         Shares      Life (a)     Price        Shares       Price
--------------------         ------      --------     -----        ------       -----
$  1.25 - $  2.59             166,500      6.69      $ 2.22         14,167     $ 2.59
$  2.82 - $  2.88           1,632,330      4.68        2.83      1,189,222       2.82
$  3.41 - $  5.25             320,533      6.23        4.05         78,061       4.80
$  6.88 - $  8.04             434,751      6.13        7.19        105,005       6.88
$12.00 - $18.00                41,183      5.09       15.54         37,311      15.51
                            ---------                            ---------
                            2,595,297                            1,423,766
                            =========                            =========

(a)  Weighted average contractual life remaining in years.

                                      F-14




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

         During 2000, the Company granted 40,500  non-qualified stock options to
         consultants and recognized  consulting  expense of $516,571  related to
         non-qualified  stock  options  during 2000.  During  1999,  the Company
         granted  103,333   non-qualified   stock  options  to  consultants  and
         recognized  consulting  expense of  $466,305  related to  non-qualified
         stock options during 1999.

         A summary of the activity under the IQO Plan is as follows:

                                                                      Weighted
                                                Options       Shares  Average
                                               Available      Under   Exercise
                                               for Grant      Option   Price
                                               ---------      ------   -----

Options outstanding at January 1, 1999           --            --      $  --

Shares authorized                           5,000,000          --         --
Granted                                    (2,137,250)    2,137,250        .34
Exercised                                        --            --         --
Canceled                                         --            --         --
                                           ----------    ----------    -------

Options outstanding at December 31, 1999    2,862,750     2,137,250        .34

Granted                                      (895,500)      895,500        .80
Exercised                                        --            (721)       .20
Canceled                                       17,279       (17,279)       .20
                                           ----------    ----------    -------

Options outstanding at December 31, 2000    1,984,529     3,014,750        .46
                                           ----------    ----------    -------

Options exercisable at December 31, 2000                  1,228,061
                                                          =========

Options exercisable at December 31, 1999                    660,791
                                                          =========

         During  1999,  IQO  granted  750,000  non-qualified  stock  options  to
         consultants and recognized consulting expense of $66,667 and $5,556 for
         the years ended  December 31, 2000 and 1999,  respectively,  related to
         non-qualified stock options.

         Proforma  information  regarding  net income and  earnings per share is
         required  by SFAS 123,  and has been  determined  as if the Company has
         accounted for the Plans and the IQO Plan under the fair value method of
         SFAS 123. The fair value of options issued was estimated at the date of
         grant using a  Black-Scholes  option  pricing  model with the following
         weighted average assumptions:

                                                       Year Ended December 31,
                                                        2000        1999

       Risk-free interest rate                          6.0%        5.8%
       Dividend yield                                    -           -
       Volatility percentage                            100%        100%
       Weighted average expected life in years          3.2         3.2

                                      F-15




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

         For purposes of pro forma disclosures,  the estimated fair value of the
         Company's  options is  amortized  to expense  over the options  vesting
         period.  The Company's pro forma net loss and net loss per common share
         would approximate the following:

                                                        As Reported          Pro Forma
       Year Ended December 31, 2000:
         Net loss                                     $(10,240,366)      $(11,865,916)
         Net loss per basic and diluted share                (1.08)             (1.25)
       Year Ended December 31, 1999:
         Net loss                                       (5,925,591)        (6,619,823)
         Net loss per basic and diluted share                (2.57)             (2.87)

9.       Business Segments

         During 2000,  the Company  adopted  Statement  of Financial  Accounting
         Standards No. 131,  "Disclosures  about  Segments of an Enterprise  and
         Related  Information"  ("SFAS 131").  Business  segments are defined by
         SFAS 131 as components of an enterprise about which separate  financial
         information  is  available  that is  evaluated  regularly  by the chief
         operating decision-maker assessing performance and making operating and
         capital decisions.

         The  Company  operates in two  business  segments;  software  sales and
         support  and  application   services.   The  following  tables  present
         revenues,  gross profit,  loss from  operations  and  depreciation  and
         amortization for the years ended December 31, 2000 and 1999, and assets
         and capital  expenditures  as of December 31, 2000.  Software sales and
         support  includes  software sales to third parties on a direct basis or
         through a business partner, and includes related support in the form of
         maintenance  agreements and consulting.  Application  services  include
         design,  implementation and hosting services provided to third parties,
         in some cases  utilizing the  QueryObject  technology.  The  accounting
         policies of the business  segments  are the same as those  described in
         the summary of  significant  accounting  policies in Note 1.  Corporate
         expenses  are  allocated  among  business  segments.  Interest  income,
         interest  expense  and other  expense  are not  allocated  to  business
         segments.

                                      F-16




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                Year Ended December 31,
                                                 2000           1999

Revenues
        Software sales and support          $  1,451,741    $  1,774,109
        Application services                     264,100            --
                                            ------------    ------------

                                            $  1,715,841    $  1,774,109
                                            ------------    ------------

Gross Profit
        Software sales and support          $  1,322,493    $  1,587,984
        Application services                     197,069            --
                                            ------------    ------------

                                            $  1,519,562    $  1,587,984
                                            ------------    ------------

Loss from operations
        Software sales and support          $ (7,512,684)   $ (5,623,568)
        Application services                  (3,073,034)       (291,566)
                                            ------------    ------------

                                            $(10,585,718)   $ (5,915,134)
                                            ------------    ------------

Included in loss from operations
        Depreciation and amortization
               Software sales and support   $    452,951    $    438,698
               Application services               62,976             108
                                            ------------    ------------

                                            $    515,927    $    438,806
                                            ============    ============

                                      F-17




QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


         A reconciliation  of total segment loss from operations to consolidated
net loss is as follows:

                                                  Year Ended December 31,
                                                   2000          1999
                                                   ----          ----

          Total reported segments            $(10,585,718)   $ (5,915,134)
          Interest income                         361,847          45,315
          Interest expense                        (13,523)        (41,121)
          Other expense, net                       (2,972)        (14,651)
                                             ------------    ------------

                                             $(10,240,366)   $ (5,925,591)
                                             ------------    ------------

                                             December 31,
                                               2000

          Assets
          Software sales and support         $1,540,196
          Application services                3,960,649
                                             ----------
                                             $5,500,845
                                             ==========

Capital expenditures
        Software sales and support           $  458,752
        Application services                    594,242
                                             ----------

                                             $1,052,994
                                             ==========

10.      Major Customers and International Sales

         Sales to major customers, as a percentage of revenues, are as follows:

                              Year Ended       Year Ended
                             December 31,     December 31,
                               2000             1999

         A                     13%               22%
         B                     15%                -
         C                     20%                -
         D                     14%                -
         E                     12%                -
         F                      -                25%
         G                      -                14%
         H                      -                11%


                                      F-18



QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

         At December  31,  2000,  customers A and B  represented  46% and 27% of
         total  accounts  receivable,   respectively.   At  December  31,  1999,
         customers  A, F, G and H  represented  31%,  17%,  20% and 16% of total
         accounts receivable, respectively..

         International sales for the year ended December 31, 2000 were $288,568,
         or 17% of total  revenues and for the year ended December 31, 1999 were
         $873,900,  or 49% of total  revenues.  International  sales  within the
         country of Italy for the year ended December 31, 2000 were $221,500, or
         13%  of  total  revenues.   For  the  year  ended  December  31,  1999,
         international sales within the country of Sweden were $436,300,  or 25%
         of total revenues and  international  sales within the country of Italy
         were $398,000, or 22% of total revenues.

         All  customers  above  are  part  of the  software  sales  and  support
         operating  segment,  except  for  customer  E  which  is  part  of  the
         application services operating segment.

11.      Employee Benefit Plans

         The Company has a 401(k) savings plan (the "Savings Plan") covering all
         full-time  employees and  qualifying  part time  employees.  As allowed
         under Section  401(k) of the Internal  Revenue  Code,  the Savings Plan
         provides   tax-deferred   salary  reductions  for  eligible  employees.
         Employees are  immediately  eligible to participate in the Savings Plan
         upon employment.  Participants may make voluntary  contributions to the
         Savings Plan up to 20% of their compensation, subject to annual limits.
         The Savings Plan permits company contributions, however, none were made
         during the years ended December 31, 2000 and 1999.

12.      Obligations Under Capital and Operating Leases

         The Company is obligated  under capital leases for computers and office
         equipment  through 2001. All assets leased under these  agreements have
         been  capitalized  and the related  obligations  are  reflected  in the
         consolidated  financial  statements  based  upon the  present  value of
         future  minimum lease  payments.  In addition,  the Company  leases its
         office facilities and certain furniture and equipment.  These operating
         leases are noncancellable and expire on various dates through 2004.

                                      F-19



QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

         The future minimum lease payments under capital and operating leases at
         December  31,  2000  and the  present  value of the net  minimum  lease
         payments are as follows:

                                  Operating                        Capital
Year Ended December 31,             Leases                         Leases
--------------------------------------------------------------------------

2001                             $   664,416                     $ 10,001
2002                                 687,181                            -
2003                                 713,219                            -
2004                                 634,993                            -
                                 -----------                     --------

Total minimum lease payments     $ 2,699,809                       10,001
                                 ===========

Less: amounts related to interest                                     184
                                                                ---------

Present value of net minimum lease payments due within one year $   9,817
                                                                =========

         Rental expense under operating leases was $597,858 and $336,852 for the
         years ended December 31, 2000 and 1999, respectively.

         For the years ended December 31, 2000 and 1999, the Company  recognized
         $330,858  and $54,042 of sub-lease  rental  income,  respectively.  The
         future  minimum  rentals  to be  received  under  operating  leases  at
         December 31, 2000 are as follows:

                                                          Operating
Year Ending December 31,                                    Leases

2001                                                 $     330,206
2002                                                       343,403
2003                                                       357,111
2004                                                       371,446
                                                    --------------
Total minimum rentals receivable                    $    1,402,166
                                                    ==============


                                      F-20



QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

13.      Income Taxes

         The tax effect of temporary  differences  and  carryforwards  that give
         rise to significant portions of the deferred tax assets and liabilities
         at December 31, 2000 was:

Accounts payable                                 $    225,341
Accrued expenses                                      228,520
Deferred rent                                         115,211
Net operating loss carryforwards                   18,643,297
Research and experimental credit carryforwards        360,089
Other deferred tax assets                             868,040
                                                 ------------

     Deferred tax assets                           20,440,498

Depreciation                                         (289,980)
Accounts receivable                                  (178,355)
Prepaid expenses                                      (35,097)
Other deferred tax liabilities                       (129,847)
                                                 ------------

     Deferred tax liabilities                        (633,279)

Net deferred tax assets                            19,807,219
     Less: valuation allowance                    (19,807,219)
                                                 ------------

Net deferred tax assets                          $       --
                                                 ------------

         The Company has  recorded a full  valuation  allowance  against its net
         deferred  tax  assets  since  management  believes  that based upon the
         available  objective  evidence  it is more  likely  than not that these
         assets will not be realized.

         The  reconciliation  of the  effective  income tax rate to the  Federal
         statutory rate is as follows:

                                              Year Ended December 31,
                                              2000             1999

Statutory federal benefit                 (34.0)%             (34.0)%
State taxes, net of federal benefit        (5.5)               (5.9)
Foreign tax provision                       2.6                   -
Other permanent differences                (0.4)               (1.7)
Valuation allowance                        37.3                 41.6
                                              -%                   -%


                                      F-21



QueryObject Systems Corporation

Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

         As of  December  31,  2000,  the  Company  has net  operating  loss and
         research and  experimental  tax credit  carryforwards  of approximately
         $45,332,000  and  $360,000,  respectively,  available to offset  future
         federal  taxable  income and tax.  These  carryforwards  will expire at
         various dates beginning in 2007 through 2020. In addition,  the Company
         has net operating loss carryforwards of approximately  $794,000 related
         to its  activities  in the United  Kingdom.  Under  Section  382 of the
         Internal  Revenue Code of 1986,  as amended,  utilization  of prior net
         operating  losses  ("NOLs") is limited  after an ownership  change,  as
         defined in such Section 382. As a result of previous transactions which
         involved an  ownership  change as defined by Section  382,  the Company
         will be  subject  to  limitation  on the use of its NOLs.  Accordingly,
         there can be no  assurance  that a  significant  amount of the existing
         NOLs will be available to the Company.

14.      Commitments

         Employment agreements
         The Company has  entered  into  long-term  employment  agreements  with
         certain key members of management. The agreements provide each employee
         with base annual compensation and incentive  compensation  payable upon
         attaining certain corporate targets determined annually by the Board of
         Directors. The agreements provide that in the event of the termination,
         other than for cause,  the executives will be entitled to twelve months
         of severance.  The aggregate annual  commitments under these employment
         agreements are $612,500 and $0 for 2001 and 2002, respectively.

15.      Subsequent event (Unaudited)

         On February 7, 2001,  the Company had the initial  closing of a private
         placement (the "2001 Private Placement") and received gross proceeds of
         $1,230,000.  The Company sold 2,050,000  Units (the "2001 Units") at an
         initial price of $.60 per Unit. Each 2001 Unit consists of one share of
         common  stock  and  two  redeemable   common  stock  purchase  warrants
         exercisable  for a five year  period at an  initial  exercise  price of
         $.925 per share.  The per unit purchase  price was based on the average
         of the closing  sales price of the  Company's  common stock in the five
         day  period  ended  two days  prior to the  initial  closing  ("Initial
         Price").  The Company  received net proceeds of $837,018 in the initial
         closing, after deducting expenses of the offering and the conversion of
         the 2000 Notes into 2001 Units.

         The Company anticipates the final closing of the 2001 Private Placement
         to occur in  April  2001.  On the  date of the  final  closing,  if the
         average  closing sales price of the Company's  common stock in the five
         day period  ended two days prior to the final  closing is less than the
         Initial Price, such lower amount will be used in determing the purchase
         price of the Units. In addition,  the Units sold in the initial closing
         will be repriced to reflect the lower price.

         In March 2001, the Board of Directors of IQO extended the time in which
         the Common Stock Purchase  Warrants (the "Warrants")  issued in the IQO
         Private  Placement  could be  exercised  until  January 31,  2002.  The
         Warrants of IQO  originally  were set to expire on April 17, 2001.  All
         remaining terms of the Warrants remain the same. The  modification  was
         accounted for in accordance with SFAS 123.

                                      F-22`